MULTIPLE CHOICE

1. Which statement is true?

a. World-class companies must maintain strategic agility and be able to turn on a
dime.
b. World-class companies motivate and treat employees like appreciating assets.
c. Manufacturing firms that achieve world-class status do so by following a
philosophy of lean manufacturing
d. All the above are true

2.Which function is not a part of the batch production process?

a. Plan and control production
b. Prepare purchase orders
c. Maintain inventory control
d. Perform cost accounting

3. Lead time times daily demand is

a. the economic order quantity
b. safety stock
c. the reorder point
d. total inventory

4. Which process creates a homogeneous product through a continuous series of standard

procedures?
a. batch process
b. make-to-order process
c. continuous process
d. none of the above

5. An example of a continuous process is the production of

a. wedding invitations
b. milk products
c. jet aircraft
d. all of the above

6. All of the following are characteristics of batch processing except

a. each item in the batch is similar
b. batches are produced in accordance with detailed customer specifications
c. batches are produced to replenish depleted inventory levels
d. setting up and retooling is required for different batches

7. When one of the following statements is true?

a. ERP evolved directly from MRP.
b. ERP evolved into MRP and MRP evolved into MRP II
c. MRP II evolved from MRP and MRP II evolved into ERP
d. None of the above is true.
 8. The production schedule is
a. the expected demand for the firm’s finished goods for a given year
b. the formal plan and authority to begin production
c. a description of the type and quantity of raw materials and subassemblies used to
produce a single unit of finished product
d. the sequence of operations during manufacturing

9. A move ticket
a. is the formal plan and authority to begin production
b. specifies the materials and production required for each batch
c. records the work done in each work center
d. authorizes the storekeeper to release materials to work centers

10. The internal control significance of the excess materials requisition is that it
a. indicates the amount of material released to work centers
b. identifies materials used in production that exceed the standard amount allowed
c. indicates the standard quantities required for production
d. documents the return to raw materials inventory of unused production materials

11. Inventory control performs all of the following tasks except it

a. provides production planning and control with the inventory status report of
finished goods
b. updates the raw material inventory records
c. prepares a materials requisition for each production batch
d. records the completed production as an increase to finished goods inventory

12. The storekeeper releases raw materials based on the

a. production schedule
b. materials requisition
c. work order
d. bill of materials

13. Which of the following is not an assumption of the Economic Order Quantity model?
a. demand for the product is known with certainty
b. total cost per year of placing orders is fixed
c. lead time is known and is constant
d. there are no quantity discounts

14. Firms hold safety stock to compensate for

a. mathematical weaknesses of the Economic Order Quantity model
b. variations in lead time or daily demand
c. fluctuations in carrying costs
d. uncertainty in the estimation of ordering costs
15. What is the economic order quantity if the annual demand is 10,000 units, set up cost of placing
each order is $3 and the holding cost per unit per year is $2?
a. 174
b. 123
c. 245
d. 116

16. If the daily demand is 40 units and the lead time is 12 days, the reorder point is
a. 40 units
b. 48 units
c. 480 units
d. none of the above

17. Which statement is not correct?

a. General ledger creates a new cost record upon receipt of a work order from
production planning and control.
b. Cost accounting updates the cost record with data gathered from the materials
requisition.
c. General ledger posts summary information about the manufacturing process based
on a journal voucher prepared by cost accounting.
d. Cost accounting computes variances and applies overhead to individual cost
records.

18. Which of the following is not a problem associated with standard cost accounting?
a. Standard costing motivates management to produce large batches of products and
build inventory.
b. Applying standard costing leads to product cost distortions in a lean environment.
c. Standard cost data are associated with excessive time lags that reduce its
usefulness.
d. The financial orientation of standard costing may promote bad decisions.
e. All of the above are problems with standard costing.

19. Computer integrated manufacturing includes all of the following technologies except
a. robotics
b. materials requirements planning
c. automated storage and retrieval systems
d. computer aided design

20. Which of the following would not be included as a value stream cost?
a. Labor costs of employees who simply transport the product from cell to cell.
b. Labor costs of employees who design the product.
c. A charge per square foot for the value stream production facility including cost of
rent and building maintenance.
d. All of the above are value stream costs
21. Which situation violates the segregation of functions control procedure?
a. production planning and control is located apart from the work centers
b. inventory control maintains custody of inventory items
c. cost accounting has custody of and makes entries on cost records
d. work centers record direct labor on job tickets

22. All of the following are internal control procedures that should be in place in the conversion
cycle except
a. calculation and analysis of direct material and direct labor variances
b. retention of excess materials by work centers
c. physical count of inventory items on hand
d. limited access to raw material and finished goods inventories

23. Which of the following is not true regarding ABC?

a. ABC is too time-consuming and complicated for practical applications over a
sustained period.
b. ABC identifies the most and least profitable products and customers.
c. ABC promotes the lean manufacturing philosophies of process simplification and
waste elimination.
d. All of the statements are true.

24. A manufacturing process that is organized into group technology cells utilizing no human labor
is called
a. islands of technology
b. process simplification
c. computer integrated manufacturing
d. traditional manufacturing

25. An example of automation of manufacturing design is

a. Computer Aided Engineering
b. Automated Storage and Retrieval Systems
c. Computer Numerical Control
d. Robotics

ANSWER KEY:
1. d
2. b
3. c
4. c
5. b
6. b
7. c
8. d
9. c
10. b
11. b
12. c
13. b
14. b
15. b
16. a
17. c
18. a
19. e
20. b
21. d
22. b
23. a
24. a
25. a